N/A(Former name, former address and former
fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of "large accelerated filer,"
"accelerated filer" and "smaller reporting company" in Rule 12b-2 of the
Exchange Act.

Large accelerated filer

[ ]

Accelerated filer

[ ]

Non-accelerated filer

[ ]

(Do not check if a smaller reporting company)

Smaller reporting company

[X]

Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No
[X]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. Yes [ ] No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date
20,836,000 shares of common stock are issued and outstanding as of January
22, 2013.

The accompanying notes are an integral part of these financial
statements.

2

PediatRx Inc.

(A Development Stage Company)

Statements of Operations

For the period

from the date

For the three

For the three

For the nine

For the nine

of inception on

month period

month period

month period

month period

March 18, 2005

ended

ended

ended

ended

to November 30, 2012

November 30, 2012

November 30, 2011

November 30, 2012

November 30, 2011

Net revenues

$

1,168,498

$

-

$

125,715

$

120,640

$

362,061

Cost of Goods Sold

341,277

1,152

32,855

36,276

94,218

Gross Margin

827,221

(1,152

)

92,860

84,364

267,843

Expenses

Employee expenses

654,162

35,970

91,711

145,075

283,925

Stock based compensation

346,050

-

58,024

132,138

173,516

Consulting fees

620,394

242

67,655

3,276

201,619

Marketing expense

640,776

30,949

53,877

46,883

305,994

Travel expense

67,641

85

3,468

8,299

32,222

Interest expense

72,056

14,959

3,972

31,081

16,346

Legal and accounting fees

512,927

13,189

29,025

123,564

94,934

Mineral property expenditures

15,124

-

-

-

-

Insurance expense

175,169

21,752

17,708

58,098

35,691

Regulatory expense

119,098

749

6,685

13,577

44,314

Rent

19,406

-

1,663

-

4,793

General and administrative expense

264,229

12,132

13,787

30,738

53,227

Amortization expense

204,135

20,214

22,070

64,355

66,211

Write down of mineral property acquisition
costs

5,000

-

-

-

-

Total Expenses

3,716,167

150,241

369,645

657,084

1,312,792

Gain on sale of product rights

64,900

-

-

-

-

Other income (loss)

827,807

(172,193

)

-

827,807

-

Net income (loss) for the period

$

(1,996,239

)

$

(323,586

)

$

(276,785

)

$

255,087

$

(1,044,949

)

Basic and diluted income (loss) per common share

$

(0.016

)

$

(0.013

)

$

0.012

$

(0.050

)

Weighted average number of common shares usedin per share calculations

20,836,000

20,836,000

20,836,000

20,836,000

The accompanying notes are an integral part of these financial
statements.

3

PediatRx Inc.

(A Development Stage Company)

Statements of Changes in Stockholders' Equity
(Deficit)

Deficit,

accumulated

Total

Additional

during the

stockholders

Number of

Capital

paid-in

development

equity

shares issued

stock

capital

stage

(deficit)

Balance as of March 18,
2005 (inception)

-

$

-

$

-

$

-

$

-

Restricted common
shares issued for cash ($0.0005 per share)  September
2005

10,000,000

1,000

4,000

-

5,000

Contributions to
capital by related parties  expenses

-

-

600

-

600

Net loss for the period

-

-

-

(21,237

)

(21,237

)

Balance as of February 28,
2006

10,000,000

1,000

4,600

(21,237

)

(15,637

)

Common shares issued
for cash ($0.005 per share)  May 2006

10,000,000

1,000

49,000

-

50,000

Common shares issued
for services ($0.005 per share)  August 2006 and
February 2007

6,000

1

29

-

30

Contributions to
capital by related parties  expenses

-

-

11,400

-

11,400

Net loss for the year

-

-

-

(50,890

)

(50,890

)

Balance as of February 28,
2007

20,006,000

2,001

65,029

(72,127

)

(5,097

)

Contributions to
capital by related parties  expenses

-

-

14,400

-

14,400

Common shares returned
and cancelled for cash ($0.005 per share)  April 2007

(1,000,000

)

(100

)

(4,900

)

-

(5,000

)

Common shares issued
for cash ($0.01 per share)  May 2007

1,000,000

100

4,900

-

5,000

Net loss for the year

-

-

-

(65,411

)

(65,411

)

Balance as of February 29,
2008

20,006,000

2,001

79,429

(137,538

)

(56,108

)

Contributions to
capital by related parties  expenses

-

-

14,400

-

14,400

Contributions to
capital by related parties  loan forgiveness

-

-

38,950

-

38,950

Common shares issued
for cash ($0.10 per share)  November 2008

500,000

50

49,950

-

50,000

Net loss for the year

-

-

-

(53,957

)

(53,957

)

Balance as of February 28,
2009

20,506,000

2,051

182,729

(191,495

)

(6,715

)

Contributions to
capital by related parties expenses

-

-

14,399

-

14,399

Net loss for the year

-

-

-

(58,201

)

(58,201

)

Balance as of February 28,
2010

20,506,000

2,051

197,128

(249,696

)

(50,517

)

Contributions to
capital by related parties  expenses

-

-

3,600

-

3,600

Common shares issued
for cash ($0.20 per share)  June 2010

1,500,000

150

299,850

-

300,000

Common shares issued
for cash ($0.50 per share)  July 2010

1,500,000

150

749,850

-

750,000

Common shares issued
for cash ($1.00 per share)  November 2010

825,000

83

824,917

-

825,000

Common shares returned
and cancelled  November 2010

(3,700,000

)

(370

)

370

-

-

Common shares issued
for debt cancellation ($1.00 per share)  November
2010

205,000

20

204,980

-

205,000

Net loss for the year

-

-

-

(1,049,087

)

(1,049,087

)

Balance as of February 28,
2011

20,836,000

2,084

2,280,695

(1,298,783

)

983,996

Stock based
compensation

-

-

213,912

-

213,912

Net loss for the year

-

-

-

(952,543

)

(952,543

)

Balance as of February 29,
2012

20,836,000

2,084

2,494,607

(2,251,326

)

245,365

Stock based
compensation

-

-

132,138

-

132,138

Net income for the
period

-

-

-

255,087

255,087

Balance as of November 30,
2012

20,836,000

$

2,084

$

2,626,745

$

(1,996,239

)

$

632,590

The accompanying notes are an integral part of these financial
statements.

4

PediatRx Inc.

(A Development Stage Company)

Statements of Cash Flows

For the period

from the date

For the nine

For the nine

of inception on

month period

month period

March 18, 2005

ended

ended

to November 30,
2012

November 30, 2012

November 30, 2011

Cash flows from operating activities

Net income (loss) for the
period

$

(1,996,239

)

$

255,087

$

(1,044,949

)

Adjustments to reconcile loss to
net cash used in operating activities

Amortization expense

204,135

64,355

66,211

Inventory
obsolescence expense

90,500

-

-

Gain on sale of product rights (Note 2)

(64,900

)

-

-

Gain from additional
consideration received
from Apricus (Note 2)

(1,000,000

)

(1,000,000

)

Contributions to
capital by related parties
 expenses

58,799

-

-

Contributions to
capital by related party
 forgiveness of debt

38,950

-

-

Common shares issued for services

30

-

-

Write down of
mineral property acquisition costs

5,000

-

-

Loss on sale of investment in Apricus

18,517

18,517

-

Impairment loss on
investment in Apricus

153,676

153,676

Stock based compensation

346,050

132,138

173,516

Changes in operating assets and liabilities;
net of effects from acquisition of Granisol product line and mineral
property interest

Decrease
(increase) in accounts receivable

(40,208

)

66,427

(1,020

)

Decrease in inventories

26,680

2,169

11,034

Decease
(increase) in prepaids and deposits

(18,250

)

91

(17,230

)

Increase (decrease) in accounts
payable and accrued liabilities

345,299

(42,661

)

101,722

Cash used in
operating activities

(1,831,961

)

(350,201

)

(710,716

)

Cash flows from investing activities

Acquisition of mineral
property interest

(10,000

)

-

-

Proceeds from sale of product rights

64,900

-

-

Proceeds from Apricus
investment

123,464

123,464

-

Acquisition of Granisol product line

(1,000,000

)

-

-

Cash used in
investing activities

(821,636

)

123,464

-

Cash flows from financing activities

Decrease in due to related
party

-

-

-

Proceeds from issuance of promissory notes

705,000

-

250,000

Common shares returned to
treasury

(5,000

)

-

-

Proceeds from issuance of common stock

1,985,000

-

-

Cash provided
by financing activities

2,685,000

-

250,000

Increase (decrease) in cash and cashequivalents

31,403

(226,737

)

(460,716

)

Cash
and cash equivalents, beginning of period

-

258,140

549,392

Cash and cash
equivalents, end of period

$

31,403

$

31,403

$

88,676

The accompanying notes are an integral part of these financial
statements.

5

1.

Basis of Presentation

The accompanying unaudited condensed financial statements
of PediatRx Inc. (the "Company" or PediatRx) have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission, or the SEC, including the instructions to Form 10-Q and
Regulation S-X.

In the opinion of the management of the Company, all
adjustments, which are of a normal recurring nature, necessary for a fair
statement of the results for the three and nine month periods and for the
period from the date of inception have been made. Results for the interim
periods presented are not necessarily indicative of the results that might
be expected for the entire fiscal year. When used in these notes, the
terms "Company", "we", "us" or "our" mean PediatRx Inc..

Certain information and note disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles in the United States of America have been
condensed or omitted from these statements pursuant to such accounting
principles and, accordingly, they do not include all the information and
notes necessary for comprehensive financial statements and should be read
in conjunction with our audited financial statements for the year ended
February 29, 2012.

2.

Nature and Continuance of Operations

Striker Energy Corp. was incorporated under the laws of
the State of Nevada on March 18, 2005. The Company originally intended to
engage in the acquisition and exploration of mineral properties. In 2008,
the Company transitioned its business from mineral property exploration to
oil and natural gas exploration.

Effective September 12, 2008, the Company completed a
stock split by the issuance of two new common shares for each one
outstanding common share of the Company. Unless otherwise noted, all
references herein to number of shares, price per share or weighted average
number of shares outstanding have been adjusted to reflect this stock
split on a retroactive basis.

On June 17, 2010, the Company entered into a letter of
intent with Cypress Pharmaceutical, Inc. (Cypress) to acquire all of the
assets associated with Granisol® (granisetron HC1) oral solution
(Granisol). First approved in 2008, Granisol is the only oral, liquid
granisetron solution, formerly distributed by Hawthorn Pharmaceuticals, a
subsidiary of Cypress. The Food and Drug Administration has approved the
use of Granisol in cancer care to treat nausea and vomiting associated
with cancer therapy. On June 18, 2010, the Company incorporated PediatRx
Inc., the Companys wholly-owned subsidiary under the laws of the state of
Nevada. On July 23, 2010, PediatRx Inc. concluded a definitive agreement
to acquire Granisol from Cypress and the Company turned its focus to the
pharmaceutical industry and terminated its interest in oil and natural gas
exploration. Effective December 28, 2010, the Company merged with its
subsidiary (PediatRx Inc.) and changed its name to PediatRx
Inc..

On September 12, 2011 the Company entered into a
co-promotion agreement with Bi-Coastal Pharmaceutical Corp.
(Bi-Coastal). Pursuant to the co-promotion agreement, Bi-Coastal granted
the Company the non-exclusive right to promote Aquoral within the United
States of America. Aquoral, another oncology supportive care product, is
an FDA-cleared treatment for xerostomia (the medical term for dry mouth
due to a lack of saliva). Xerostomia is especially prevalent in patients
undergoing various treatments for cancer and those with Sjogrens
syndrome. The Company is required to include Aquoral in no less than 85%
of its sales calls.

6

In return for the Companys promotional
efforts, it will receive compensation for each unit sold. The agreement with
Bi-Coastal is for an initial term of two years and will automatically renew for
one year terms unless either party provides notice of non-renewal at least six
months prior to the expiration of the then-current term. The agreement is
terminable at any time, by either party, upon six months prior written notice to
the other party and is also terminable for cause.

On January 26, 2012, the Company
entered into a binding term sheet (the "Term Sheet") with Apricus Biosciences,
Inc. ("Apricus") for (1) a Co-Promotion Agreement in the United States for
Granisol (the "Co-Promotion Agreement"), (2) the assignment of its Co-Promotion
Agreement with Bi-Coastal for Aquoral to Apricus (the "Assignment Agreement)
and (3) a Sale Agreement for Granisol outside of the United States (the "Asset
Purchase Agreement"). Also in the Term Sheet, the Company entered into a
non-binding arrangement (the "Arrangement") for the sale of the Company to
Apricus in a proposed merger transaction (the "Acquisition").

On February 21, 2012 the Company
entered into three definitive agreements and one side letter with Apricus which
include the Co-Promotion Agreement, the Assignment Agreement and the Asset
Purchase Agreement. Pursuant to the Co-Promotion Agreement, the Company granted
to Apricus the exclusive right to commercialize Granisol in six U.S. states and
the non-exclusive right to commercialize Granisol in all other U.S. States, in
addition to the right to manufacture Granisol. In addition, the Company has
agreed that, for a period of five years from the effective date of the
Co-Promotion Agreement, it will not license any co-promotion rights in the
non-exclusive states to any third party. The Company has retained the right to
commercialize Granisol in the non-exclusive states. The Company will recognize
sales in the non-exclusive states that it generates through its own promotional
efforts. Each party has agreed to cooperate with the other in respect of
promotional materials and efforts on terms specified in the Co-Promotion
Agreement.

The initial term of the Co-Promotion
Agreement is for a period of ten years from the effective date, though it may be
terminated prior to expiration under certain conditions. If the Co-Promotion
Agreement is terminated by the Company prior to the end of the initial term, the
Company will be required to pay to Apricus an amount based upon a varying
percentage of its net operating income related to Granisol for a period
subsequent to termination depending upon when the termination occurs.

Pursuant to the Assignment Agreement,
the Company has assigned all of its rights and responsibilities under the
Co-Promotion Agreement with Bi-Coastal for Aquoral, and Apricus has assumed all
rights and responsibilities under the Co-Promotion Agreement for Aquoral as of
the effective date. Bi-Coastal has consented to the assignment of the
Co-Promotion Agreement for Aquoral.

Pursuant to the Asset Purchase
Agreement, the Company sold to Apricus all of its rights related to Granisol in
all countries and territories outside of the United States. The Company has also
agreed that it and its officers and directors will not compete in the field of
anti-emetic products in certain areas outside of the United States.

As consideration for entering into
these three Agreements the Company received an initial payment of $325,000 from
Apricus. The agreements also provide for the payment to the Company of a royalty
that will be calculated based upon Apricus' United States generated net
operating income related to Granisol. The Company has recognized revenues of
$260,000 associated with the exclusive rights for Apricus to commercialize
Granisol in six U.S. states. In addition, the Company has recognized a gain on
sale of product rights totaling $64,900 associated with the Asset Purchase
Agreement.

7

The binding term sheet between the
Company and Apricus contemplates, in addition to the transactions reflected in
the three agreements described above, a non-binding expression of interest in
the merger of the Company with Apricus. The non-binding portion of the term
sheet contemplated that the Company would be acquired by Apricus in a merger in
exchange for $4,000,000 to be paid in the common stock of Apricus, with
$3,600,000 distributed to the shareholders of the Company immediately and
$400,000 held back from shares that would be distributed to the Company's Chief
Executive Officer and Chief Financial Officer for a period of six months as an
indemnity for breaches by the Company of its representations and warranties.
Additionally, it contemplated that Apricus would assume certain debt and
liabilities of the Company up to $675,000. The side letter referred to above
refines the timing with respect to the parties' agreement that Apricus would pay
to the Company an additional fee as full consideration for the Co-Promotion
Agreement and the Asset Purchase Agreement (in the form of restricted stock of
Apricus having a value of $1,000,000) if the two companies did not merge by June
1, 2012, (or such other date as may be mutually agreed to by the Parties)
unless, prior to that date, the Company filed for bankruptcy or the Granisol
asset was materially impaired.

On June 27, 2012, the Company entered
into a Termination Agreement (the Termination Agreement) with Apricus
Biosciences, Inc. (Apricus) pursuant to which the parties acknowledged that
they have formally terminated discussion regarding the proposed merger of the
two companies.

Pursuant to the Termination Agreement,
Apricus issued and delivered to the Company 373,134 shares of its common stock
in full satisfaction of its obligation to pay the Company $1,000,000 in common
stock as a break-up fee. The Company has recognized other income of $1,000,000
related to the break-up fee.

In addition, pursuant to the
Termination Agreement, on July 16, 2012, Apricus filed a Registration Statement
on Form S-3 registering these shares for resale, which the Registration
Statement was declared effective by the Securities and Exchange Commission on
October 3, 2012. The Company has agreed that if it proposes to sell any of the
shares on a public market or quotation service, it will only be permitted to
sell on any given trading day, such number of shares as does not exceed 5% of
the average daily volume of the Apricuss common stock traded in the previous
five trading days. Due to the sales restrictions, the Company determined the
fair value using quoted prices for similar assets in active markets that are
directly observable and thus represent a Level 2 fair value measurement. The
fair value of the investment in Apricus was $1,000,000 at the effective date of
the termination and August 31, 2012. The Company has recognized a loss on sale
of investment in its statements of operations totaling $18,517 for the three and
nine month period ended November 30, 2012 related to common stock of Apricus
sold during the period. The Company determined the fair value of the investment
in Apricus to be $704,343 at November 30, 2012. The Company has continued to
sell the common stock of Apricus subsequent to November 30, 2012 and does not
expect to recover the entire original basis in the common stock. The Company
concluded the decline in fair value is other than temporary and has recognized
an impairment loss of $153,676 in its statements of operations for the three and
nine month period ended November 30, 2012.

PediatRx intends to utilize the
proceeds from the sale of Apricus common stock to pay off certain notes payable
and other liabilities and for continuing operations. The Company is
investigating other business development and product opportunities and strategic
alternatives.

The Company is a development stage
enterprise, as defined in Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) Topic 915, Development Stage
Entities. The Company has devoted substantially most of its efforts to the
initial marketing of Granisol and has been seeking to secure
rights to other pharmaceutical products through acquisition, licensing and
reformulation activities.

8

The Company has net income of $255,087
for the nine month period ended November 30, 2012, a net loss of $1,044,949 for
the nine month period ended November 30, 2011, a net loss of $1,996,239 for the
period from inception on March 18, 2005 through November 30, 2012 and has a
working capital deficit at November 30, 2012 of $47,087 (February 29, 2012 
working capital deficit of $498,667). The Company's financial statements as of
November 30, 2012 and for the nine month period ended November 30, 2012 have
been prepared on a going concern basis, which contemplates the realization of
assets and the settlement of liabilities and commitments in the normal course of
business.

Management cannot provide assurance
that the Company will ultimately achieve profitable operations or become cash
flow positive, or raise additional debt and/or equity capital. As of November
30, 2012, the Company's assets consisted of cash and cash equivalents of
$31,403, investment in Apricus of $704,343 and accounts receivable from product
sales, net of sales allowances, of $40,208. Management believes that the
Company's capital resources are not currently adequate to continue operating and
maintaining its business strategy for the fiscal year ending February 28, 2013.
The Company had fully intended to pursue the merger with Apricus. Pursuant to
the Termination Agreement, the Company will utilize the proceeds from sales of
Apricus common stock to pay certain notes payable and other liabilities and is
investigating business development and other strategic alternatives. Although
the Company has historically raised capital from sales of equity and from the
issuance of promissory notes, there is no assurance that it will be able to
continue to do so. If the Company is unable to raise additional capital, secure
additional lending in the near future or complete business development
activities which leverage remaining Granisol opportunities, or to secure other
product opportunities to leverage its infrastructure, management expects that
the Company will need to curtail or cease operations. These financial statements
do not include any adjustments related to the recoverability and classification
of assets or the amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.

The Company was in the process of
transitioning to its new operating business and expects to incur operating
losses for the next twelve months as it moves forward with its co-promotion
efforts with Apricus for Granisol and explores other product and business
development opportunities.

9

3.

Net Loss Per Common Share

The Company computes net income or loss
per share in accordance with ASC 260, Earnings per Share ("ASC 260"). ASC
260 requires presentation of both basic and diluted earnings per share ("EPS")
on the face of the statement of operations. Basic EPS is computed by dividing
net income or loss available to common shareholders (numerator) by the weighted
average number of common stock equivalents outstanding (denominator) during the
period. Diluted EPS gives effect to all dilutive potential common stock
equivalents outstanding during the period using the treasury stock method and
convertible preferred stock using the if-converted method. In computing diluted
EPS, the average stock price for the period is used in determining the number of
shares assumed to be purchased from the exercise of stock options or warrants.
Diluted EPS excludes all dilutive potential shares if their effect is
anti-dilutive and excludes any common stock equivalents that are out-of-the-money. For the nine month
period ended November 30, 2012 there were no warrants exercisable. For the nine
month period ended November 30, 2011 there were 515,000 warrants and 1,152,000
options which have been excluded from the calculation because their effect would
be anti-dilutive.

10

4.

The Granisol Acquisition

On July 23, 2010 (the Closing Date),
the Granisol product line was acquired by the Companys wholly owned subsidiary
PediatRx Inc. for cash consideration totaling $1 million. All inventories and
intangibles associated with the Granisol product line were included in the
purchase. The related inventory was received in October 2010. The Company is
amortizing the product rights and know-how over the estimated useful life of ten
years on a straight line basis, beginning with August 2010. Operations of the
Granisol product line are included in the Companys statement of operations
since the Closing Date.

As part of the closing and transfer of
assets to PediatRx Inc. on July 23, 2010, PediatRx Inc. assumed a single product
manufacturing and supply agreement with Therapex, a division of E-Z-EM Canada,
Inc. to enable the manufacturing of the Granisol product line. Under the terms
of the agreement, Therapex will manufacture the product in compliance with
current Good Manufacturing Practice (cGMP) and oversee all quality control and
packaging through to finished product to meet PediatRx's requirements for
Granisol.

The purchase price for the Granisol
product line was allocated in accordance with the acquisition method of
accounting. The acquisition method of accounting is based on ASC 805,
Business Combinations, and uses the fair value concepts defined in ASC
820, Fair Value Measurements and Disclosures.

11

5.

Promissory Notes

November 30,

February 29,

2012

2012

Issued on June 15, 2009, this unsecured promissory note,
bearing simple interest at five percent (5%) per annum on the principal
balance of $50,000, was originally due on June 15, 2011. This promissory
note was amended effective on May 18, 2011, April 19, 2012 and July 25,
2012, whereby the maturity date of the note was extended until December
31, 2012 and the interest rate was increased from the original 5% to 12%
per annum effective July 25, 2012, calculated monthly in arrears and
payable at maturity. When not in default, the unsecured promissory note
and any accrued interest can be repaid in whole or in part without notice
or penalty.

$ 50,000

$ 50,000

Issued on July 26, 2010, this unsecured promissory note,
bearing simple interest at five percent (5%) per annum on the principal
balance of $200,000, was originally due on July 26, 2011. This promissory
note was amended effective May 23, 2011 and July 25, 2012, whereby the
maturity date of the note was extended until December 31, 2012 and the
interest rate was increased from the original 5% to 12% per annum
effective July 25, 2012, calculated monthly in arrears and payable at
maturity. When not in default, the unsecured promissory note and any
accrued interest can be repaid in whole or in part without notice or
penalty with a minimum of six months interest due if repaid prior to the
six month anniversary.

200,000

200,000

Issued on May 6, 2011 this unsecured promissory note, bearing
simple interest at five percent (5%) per annum on the principal balance of
$250,000, was originally due on May 6, 2012. Effective April 19, 2012 this
promissory note was amended on April 19, 2012 and again on July 25, 2012,
whereby the maturity date of the note was extended until December 31, 2012
and the interest rate was increased from the original 5% to 12% per annum
effective July 25, 2012, calculated monthly in arrears and payable at
maturity. When not in default, the unsecured promissory note and any
accrued interest can be repaid in whole or in part without notice or
penalty with a minimum of six months interest due if repaid prior to the
six month anniversary.

250,000

250,000

Total Promissory Notes

$ 500,000

$ 500,000

The
promissory notes were not paid on their due dates of December 31, 2012 and are
due on demand.

6.

Related Party Transactions

Effective May 28, 2010, PediatRx
entered into a consulting agreement with Dr. Cameron Durrant, a shareholder of
the Company, to assist management in the identification of opportunities
available to the Company in the healthcare industry and to recommend terms of
potential acquisitions. Dr. Durrant's agreement with the Company dated May 28,
2010 was terminated in lieu of a new agreement on September 24, 2010.

On September 24, 2010, with retroactive effect to July 1, 2010,
the Company entered into a second consulting agreement with Dr. Cameron Durrant.
Pursuant to the consulting agreement, Dr. Durrant agreed to perform such duties as are regularly and customarily
performed by the Chief Executive Officer of a corporation. The term of the
consulting agreement is one year from July 1, 2010, unless both parties agree to
extend. On July 1, 2011, the agreement was extended for an additional two year
period. On January 1, 2012, Dr. Durrant agreed to forgo any further consulting
fees.

12

In addition, of the 4,250,000 shares of the Company's common
stock owned by Dr. Durrant, 2,833,333 shares are subject to a lockup agreement
between the Company and Dr. Durrant, which lockup agreement became effective
February 9, 2011. Pursuant to the terms of the lockup agreement, Dr. Durrant
agreed not to sell, assign or convey or otherwise dispose of any shares subject
to the lockup agreement until December 31, 2015. The lockup agreement expires on
December 31, 2015.

During the nine month period ended November 30, 2012, the
Company incurred consulting fees of $0 (November 30, 2011 - $187,500, cumulative
 $449,500) in connection with Dr. Durrant's consulting agreements. The Company
has recorded a payable to Dr. Durrant of $170,253 related to consulting fees. Of
that, $286 has been paid to Dr. Durrant, leaving a payable of $169,697 as of
November 30, 2012. In addition, the Company has recorded a payable to Dr.
Durrant of $51,342 related to business establishment expenses incurred by Dr.
Durrant. Of that, $49,714 has been paid to Dr. Durrant, leaving a payable of
$1,628 as of November 30, 2012.

On September 14, 2010, with retroactive effect to July 1, 2010,
the Company entered into an employment agreement with Mr. David Tousley, Chief
Financial Officer, Treasurer and Secretary of PediatRx. Pursuant to the
employment agreement, Mr. Tousley agreed to perform such duties as are regularly
and customarily performed by the Chief Financial Officer of a Corporation. Mr.
Tousley is also eligible to receive an annual bonus and an annual stock option
award at the end of each year at the discretion of the Board of Directors of
PediatRx. The term of the employment agreement is two years from July 1, 2010,
unless both parties agree to extend.

As of March 1, 2012, the Company gave notice to Mr. Tousley,
that it will be terminating the employment agreement between Mr. Tousley and the
Company pursuant to Section 6.3(b) of Mr. Tousley's Employment Agreement. As a
result, Mr. Tousley's employment agreement was terminated effective October 31,
2012.

In addition, of the 400,000 shares of the Company's common
stock owned by Mr. Tousley, 266,666 shares are subject to a lockup agreement
between the Company and Mr. Tousley, which lockup agreement became effective
February 9, 2011. Pursuant to the terms of the lockup agreement, Mr. Tousley
agreed not to sell, assign, convey, or otherwise dispose of any shares subject
to the lockup agreement until December 31, 2015. The lockup agreement expires on
December 31, 2015.

On September 14, 2010, with retroactive effect to July 1, 2010,
the Company entered into an employment agreement with Mr. Jorge Rodriguez, Chief
Commercial Officer of PediatRx. Pursuant to the employment agreement, Mr.
Rodriguez agreed to perform such duties as are regularly and customarily
performed by the Chief Commercial Officer of a corporation. Mr. Rodriguez is
also eligible to receive an annual bonus and an annual stock option award at the
end of each year at the discretion of the Board of Directors of PediatRx. The
term of the employment agreement is two years from July 1, 2010, unless both
parties agree to extend. On December 15, 2011, Mr. Rodriguez, resigned from all
positions with the Company and the Company entered into an agreement with Mr.
Rodriguez pursuant to which it terminated his employment agreement and amended
his stock option agreement (dated March 4, 2011) in order to terminate all
unvested

13

options effective immediately and to extend the exercise period
for his 105,000 vested options to December 15, 2012. In connection with the
termination, the Company paid Mr. Rodriguez the amount of $19,500.

On November 3, 2010, 3,700,000 shares of the Company owned by
Opex Energy Corp., which corporation is controlled by Joseph Carusone, a
director of PediatRx Inc., were returned to the Company for no cash or other
consideration. These shares were cancelled.

14

7.

Stock Options

Effective February 18, 2011, the Board
of Directors adopted and approved the 2011 stock option plan. The purpose of the
2011 stock option plan is to enhance the long-term stockholder value of the
Company by offering opportunities to directors, key employees, officers,
independent contractors and consultants of the Company to acquire and maintain
stock ownership in the Company in order to give these persons the opportunity to
participate in the Companys growth and success, and to encourage them to remain
in the service of the Company. A total of 2,000,000 shares of the Companys
common stock are available for issuance during the 12-month period after the
first anniversary of the adoption of the 2011 stock option plan by the Board of
Directors. During each 12-month period thereafter, the Board of Directors is
authorized to increase the number of shares issuable by up to 500,000
shares.

A summary of the status of the
Companys outstanding stock option activity for the nine months ended November
30, 2012 is as follows:

Weighted

Average

Number

Exercise

of
Options

Price

Balance, February 29, 2012

887,500

$

1.13

Cancelled

(887,500

)

$

1.13

Balance, November 30, 2012

-

$

-

As of February 29, 2012, unrecognized
compensation costs related to non-vested stock option awards totaled $306,189.
During the nine months ended November 30, 2012, unrecognized compensation costs
was reduced by approximately $178,000 for estimated forfeitures of unvested
stock options a result of notice provided to Mr. Tousley of termination of his
employment agreement effective October 31, 2012. On May 23, 2012, the Company
agreed with all option holders to cancel any and all options outstanding as of
that date. As a result, the Company expensed all unrecognized compensation costs
as of the cancelation date. Total stock-based compensation expense for the nine
months ended November 30, 2012 and 2011 was $132,138 and $173,516, respectively.
The weighted average fair value of stock options granted during the nine months
ended November 30, 2011 was $0.60. There were no stock options granted during
the nine months ended November 30, 2012.

15

The fair value of stock options granted
has been determined using the Black-Scholes option pricing model using the
following weighted average assumptions applied to stock options granted during
the periods:

November 30,

November 30,

2012

2011

Risk-free interest rate

NA

2.15%

Expected life of options

NA

3.5 years

Annualized volatility

NA

77.0%

Dividend rate

NA

0

The volatility was determined based on
an index of volatility from comparable companies. The expected term of the
options granted to employees is derived from the simplified method as prescribed
by SEC Staff Accounting Bulletin Topic 14, Share-Based Payments (Topic 14),
given that the Company has no historical experience with the exercise of options
for which to base an estimate of the expected term of options granted. Under the
simplified method, the Company determined the expected life of the options based
on an average of the graded vesting period and original contractual term. The
Company anticipates it will discontinue the use of the simplified method of
Topic 14 once sufficient historical option exercise behavior becomes
apparent.

8.

Income Taxes

The Company has losses to carry forward
for income tax purposes as of November 30, 2012. There are no current or
deferred tax expenses for the period ended November 30, 2012 due to the
Company's loss position. The Company has fully reserved for any benefits of
these losses. The deferred tax consequences of temporary differences in
reporting items for financial statement and income tax purposes are recognized,
as appropriate. Realization of the future tax benefits related to the deferred
tax assets is dependent on many factors, including the Company's ability to
generate taxable income within the net operating loss carry-forward period.
Management has considered these factors in reaching its conclusion as to the
valuation allowance for financial reporting purposes.

A reconciliation between the income tax
expense (benefit) recognized in the Companys statements of operations and the
income tax expense (benefit) computed by applying the domestic federal statutory
income tax rate to the net income (loss) for the nine month periods ended
November 30, 2012 and 2011 is as follows:

Nine Months Ended November
30,

2012

2011

Income tax benefit at federal statutory
rate (34%)

86,729

(355,283

)

State income tax expense (benefit)

20,388

(50,052

)

Non-deductible stock based compensation

36,363

57,167

Change in valuation allowance

(143,000

)

347,000

Other

(480

)

1,168

Total income tax expense

$

-

$

-

16

The composition of the Companys
deferred tax assets as of November 30, 2012 and February 29, 2012 is as
follows:

As of

As of

November 30,

February 29,

2012

2012

Net operating loss carry-forward

$

539,000

$

695,000

Other

95,000

82,000

Less: Valuation allowance

(634,000

)

(777,000

)

Net deferred tax asset

$

-

$

-

As of November 30, 2012, the Companys
unused net operating loss carry forward of approximately $1,347,000 is available
to offset future taxable income. The potential income tax benefit of these
losses has been offset by a full valuation allowance. This unused net operating
loss carry-forward balance expires at various dates from 2026 to 2031.

9.

Subsequent Events

The following events occurred after the
nine month period ended November 30, 2012:

On Thursday, January 3, 2013, Apricus
announced their intentions to sell off their oncology supportive care business,
which includes Granisol. We are currently evaluating the impact of this decision
by Apricus on the Companys future operations.

17

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

Forward-Looking Statements

This quarterly report contains forward-looking statements. All
statements other than statements of historical facts contained in this quarterly
report, including statements regarding our future financial position, business
strategy and plans and objectives of management for future operations, are
forward looking statements. These statements relate to future events or our
future financial performance. In some cases, you can identify forward-looking
statements by terminology such as "may", "should", "expect", "plan",
"anticipate", "believe", "estimate", "predict", "potential" or "continue" or the
negative of these terms or other comparable terminology. Such forward-looking
statements include, without limitation, statements regarding our future
products, statements regarding our anticipated future regulatory submissions and
statements regarding our anticipated future cash position.

We have based these forward-looking statements largely on our
current expectations and projections about future events that we believe may
affect our financial condition, results of operations, business strategy, and
financial needs. These statements are only predictions and involve known and
unknown risks, uncertainties and other factors, including the risks in the
section entitled "Risk Factors" that may cause our company's or our industry's
actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.

Moreover, we are a relatively new entrant to the pharmaceutical
business and our management cannot predict all of the risks we will face in
establishing our company in this industry, nor can we assess the impact that
these risk factors might have on our business or the extent to which any risk
factor, or any combination of risk factors, may cause actual results to differ
materially from those contained in any forward-looking statements. You should
not rely upon forward-looking statements as predictions of future events.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.

As used in this quarterly report and unless otherwise
indicated, the terms "we", "us", "PediatRx" and "our" refer to PediatRx Inc., a
Nevada corporation. Unless otherwise specified, all dollar amounts are expressed
in United States dollars and all references to "common shares" refer to the
common shares in PediatRx's capital stock.

Corporate Overview

Our company was incorporated under the laws of Nevada on March
18, 2005 under the name "Striker Energy Corp.". From inception until the summer
of 2008, we were engaged in the mineral exploration business. During the summer
of 2008, we abandoned our mineral exploration properties and made the transition
to oil and gas. On July 23, 2010, our wholly owned subsidiary PediatRx Inc., a
Nevada corporation, completed the acquisition of Granisol from Cypress
Pharmaceutical, Inc. ("Cypress") and we abandoned our interest in the oil and
gas business in favor of pursuing opportunities in the pharmaceutical industry.
Effective December 28, 2010, we changed our name from "Striker Energy Corp." to "PediatRx Inc." to better
reflect our new business. We effected this name change by a merger with our
wholly-owned subsidiary, PediatRx Inc., a Nevada corporation.

18

Our Business

On June 17, 2010, we entered into a letter of intent with
Cypress to acquire all of the assets associated with Granisol. First approved in
2008, Granisol is an oral, liquid granisetron HCl solution, formerly distributed
by Hawthorn Pharmaceuticals, a wholly-owned subsidiary of Cypress. The Food and
Drug Administration has approved Granisol's use in cancer care to prevent nausea
and vomiting associated with cancer therapy. On June 18, 2010, we caused
PediatRx Inc. to be incorporated as a wholly-owned subsidiary of Striker Energy
Corp. under the laws of the state of Nevada. On July 23, 2010 we, through our
wholly-owned subsidiary PediatRx Inc., acquired Granisol from Cypress and we
turned our focus to the pharmaceutical industry and terminated our interest in
oil and natural gas exploration. Effective December 28, 2010, we changed our
name from "Striker Energy Corp." to "PediatRx Inc." to better reflect our new
business. We effected this name change by a merger with our wholly-owned
subsidiary, PediatRx Inc.

Granisol is our first acquisition. We were the sole distributor
of Granisol and have focused our marketing efforts on specialists in the field
of oncology and supportive care. We do not now, nor do we intend to manufacture
our products. We contracted manufacturing to Therapex, a division of E-Z-EM
Canada Inc., a subsidiary of E-Z-EM, Inc., the entity that manufactured Granisol
for Cypress.

On September 12, 2011 we entered into a co-promotion agreement
with Bi-Coastal Pharmaceutical Corp. ("Bi-Coastal"). Pursuant to the
co-promotion agreement, Bi-Coastal granted us the non-exclusive right to promote
Aquoral within the United States of America. Aquoral, a product which can be
used in oncology supportive care, is an FDA-cleared treatment for xerostomia
(the medical term for dry mouth due to a lack of saliva). Xerostomia is
especially prevalent in patients undergoing various treatments for cancer and
those with Sjogren's syndrome. We were required to include Aquoral in no less
than 85% of our sales calls. In return for our promotional efforts, we were to
receive compensation for each unit sold. The agreement with Bi-Coastal was for
an initial term of two years and automatically renews for one year terms unless
either party provides notice of non-renewal at least six months prior to the
expiration of the then-current term. The agreement was terminable at any time,
by either party, upon six months prior written notice to the other party and was
also terminable for cause.

On January 26, 2012, we entered into a binding term sheet (the
"Term Sheet") with Apricus Biosciences, Inc. ("Apricus") for (1) a Co-Promotion
Agreement in the United States for Granisol (the "Co-Promotion Agreement"), (2)
the assignment of our Co-Promotion Agreement with Bi-Coastal for Aquoral to
Apricus (the "Assignment Agreement and (3) a Sale Agreement for Granisol outside
of the United States (the "Asset Purchase Agreement"). Also in the Term Sheet,
we entered into a non-binding arrangement (the "Arrangement") for the sale of
our company to Apricus in a proposed merger transaction.

On February 21, 2012 we entered into three definitive
agreements and one side letter (the Letter Agreement) with Apricus. The three
definitive agreements consist of the Co-Promotion Agreement, the Assignment
Agreement and the Asset Purchase Agreement. Pursuant to the Co-Promotion
Agreement, we granted to Apricus the exclusive right to commercialize Granisol
in six U.S. states and the non-exclusive right to commercialize Granisol in all
other U.S. States, in addition to the right to manufacture Granisol. In
addition, we have agreed that, for a period of five years from the effective
date of the Co-Promotion Agreement, we will not license any co-promotion rights
in the non-exclusive states to any third party. We have retained the right to
commercialize Granisol in the non-exclusive states. We intend to book sales in
the non-exclusive states that we generate through our own promotional efforts.
Each party has agreed to cooperate with the other in respect of
promotional materials and efforts on terms specified in the Co-Promotion
Agreement.

19

The initial term of the Co-Promotion Agreement is for a period
of ten years from the effective date, though it may be terminated prior to
expiration under certain conditions. If the Co-Promotion Agreement is terminated
by us prior to the end of the initial term, we will be required to pay to
Apricus an amount based upon a varying percentage of our net operating income
related to Granisol for a period subsequent to termination depending upon when
the termination occurs.

Pursuant to the Assignment Agreement, we have assigned all of
our rights and responsibilities under our co-promotion agreement with Bi-Coastal
for Aquoral, and Apricus has assumed all rights and responsibilities under the
co-promotion agreement as of the effective date. Bi-Coastal has consented to the
assignment of the co-promotion agreement for Aquoral.

Pursuant to the Asset Purchase Agreement, we have sold to
Apricus all of our rights related to Granisol in all countries and territories
outside of the United States. We have also agreed that we and our officers and
directors will not compete in the field of anti-emetic products in certain areas
outside of the United States.

As consideration for entering into these three Agreements we
received an initial payment of $325,000 from Apricus. The Co-Promotion agreement
also provides for the payment to our company of a royalty that will be
calculated based upon Apricus' U.S. generated net operating income related to
Granisol.

The Term Sheet also contemplated a non-binding expression of
interest in the merger of our company with Apricus. The Letter Agreement refined
the timing with respect to the parties' agreement that Apricus would pay to our
company $1,000,000 in Apricus unregistered common stock as a breakup fee if our
two companies did not merge by June 1, 2012, (or such other date as may be
mutually agreed to by the parties). As of June 1, 2012, Apricus and our company
had mutually agreed to terminate discussions regarding the proposed merger.

On June 27, 2012, we entered in to a Termination Agreement (the
Termination Agreement) with Apricus pursuant to which the parties acknowledged
that they have formally terminated discussions regarding the proposed merger of
the two companies. Pursuant to the Termination Agreement, Apricus has issued and
delivered to us 373,134 shares of its common stock in full satisfaction of its
obligation to pay us $1,000,000 in common stock as additional consideration to
be paid by Apricus under each of the Asset Purchase Agreement and Co-Promotion
Agreement.

In addition, pursuant to the Termination Agreement, on July 16,
2012, Apricus filed a Registration Statement on Form S-3 registering these
shares for resale, which the Registration Statement was declared effective by
the Securities and Exchange Commission on October 3, 2012. The Company has
agreed that if it proposes to sell any of the shares on a public market or
quotation service, it will only be permitted to sell on any given trading day,
such number of shares as does not exceed 5% of the average daily volume of the
Apricuss common stock traded in the previous five trading days. Due to the
sales restrictions, the Company determined the fair value using quoted prices
for similar assets in active markets that are directly observable and thus
represent a Level 2 fair value measurement. The fair value of the investment in
Apricus was $1,000,000 at the effective date of the termination and August 31,
2012. The Company has recognized a loss on sale of investment in its statements
of operations totaling $18,517 for the three and nine month period ended
November 30, 2012. The Company determined fair value of the investment in
Apricus to be $704,343 at November 30, 2012. The Company has continued to sell
the common stock of Apricus and does not expect to recover the entire original
basis in the common stock. The Company concluded the decline in fair value is
other than temporary and has recognized an impairment loss of $153,676 in its
statements of operations for the three and nine month period ended November 30,
2012.

20

We are no longer pursuing the merger with Apricus, but are
continuing to focus our promotional efforts for Granisol on healthcare
professionals, payers, end-users and their caregivers, and are investigating
other business development and strategic alternatives.

Liquidity and Capital Resources

Our financial condition for the nine month periods ended
November 30, 2012 and 2011 and as of November 30, 2012 and February 29, 2012 for
the respective items are summarized below.

We have suffered recurring losses from inception. Our ability
to meet our financial liabilities and commitments is primarily dependent upon
the continued financial support of our directors and shareholders, the continued
issuance of equity to new or existing shareholders, and our ability to achieve
and maintain profitable operations. There can be no assurance that we will be
able to acquire such additional financing on acceptable terms or at all. We
currently have no agreements for such additional financing in place.

Working Capital Deficit

November 30,

February 29,

2012

2012

Current assets

$

793,212

$

384,293

Current
liabilities

840,299

882,960

Working capital surplus (deficit)

$

(47,087

)

$

(498,667

)

From February 29, 2012 to November 30, 2012, our working
capital increased by approximately $450,000, due primarily to the receipt of
$1,000,000 in Apricus common stock offset by cash used in operations for the
nine month period of approximately $350,000 as well as a decrease in accounts
receivable of approximately $66,000 during the same period. Other current assets
decreased by approximately $2,000 while accounts payable and accrued liabilities
decreased by approximately $42,000.

Cash Flows

Nine Months Ended

November 30,

2012

2011

Cash used in operating activities

$

(350,201

)

$

(710,716

)

Cash provided by investing activities

123,464

-

Cash provided by financing activities

-

250,000

Net decrease in cash

$

(226,737

)

$

(460,716

)

Cash Used in Operating Activities

Our cash used in operating activities for the nine months ended
November 30, 2012 compared to our cash used in operating activities for the nine
months ended November 30, 2011 decreased by $360,515, primarily due to a
reduction in infrastructure costs, G&A consulting costs, regulatory and
marketing expenses as a result of the co-promotion with Apricus. Apricus is now
responsible for many of the commercialization expenses associated with
Granisol.

21

Cash Provided by Financing Activities

Our cash provided by financing activities for the nine months
ended November 30, 2012 decreased by $250,000 compared to our cash provided by
financing activities for the nine months ended November 30, 2011. This decrease
was due to financing activities consisting of the issuance during the nine month
period ended November 30, 2011 of a $250,000, 5% unsecured promissory note while
no financing activity occurred during the same period in 2012.

Cash Provided by Investing Activities

Our cash provided by investing activities for the nine months
ended November 30, 2012 increased by $123,464 compared to our cash provided by
investing activities for the nine months ended November 30, 2011. This increase
was due to the sale of Apricus funds totaling $123,464 during the period ended
November 30, 2012, while no investing activity occurred during the same period
in 2012.

Results of Operations

The following summary of our results of operations should be
read in conjunction with our unaudited financial statements for the three and
nine month periods ended November 30, 2012 and 2011.

Revenues

We recognized $0 in net product revenue during the three month
period ended November 30, 2012 and $125,715 in net product revenue during the
three month period ended November 30, 2011. During the 2012 period, wholesaler
demand was lowered due to the transition between an expiring lot of Granisol,
restocking with a newly manufactured lot, the transition of distribution
activities to Apricus and the impact of their decision to sell off their
oncology supportive care business.

We recognized $120,640 in net product revenue during the nine
month period ended November 30, 2012 and $362,061 in net product revenue during
the nine month period ended November 30, 2011. During the 2012 period,
wholesaler demand was lowered due to the transition between an expiring lot of
Granisol and restocking with a newly manufactured lot and also the transition of
distribution activities to Apricus. Additionally, during the nine month period
ended November 30, 2012 we recorded a reserve for returns as a charge against
net product revenue of approximately $48,195 related to inventory at the
wholesalers with less than six months dating, while during the same period in
2011 we recorded a charge for returns of only approximately $12,815.

Cost of Goods Sold

We recognized $1,152 in cost of goods sold during the three
month period ended November 30, 2012, and $32,855 during the three month period
ended November 30, 2011. This decrease reflects a lower demand from wholesalers
during the period as well as lower third party logistics provider costs compared
to the 2011 period.

We recognized $36,276 in cost of goods sold during the nine
month period ended November 30, 2012, and $94,218 during the nine month period
ended November 30, 2011. This decrease reflects a lower demand from wholesalers
during the period as well as lower third party logistics provider costs compared
to the 2011 period.

The table below shows our expenses for the three and nine month
periods ended November 30, 2012 and 2011.

Three Months Ended

Nine Months Ended

November 30,

November 30,

Expense

2012

2011

2012

2011

Employee expenses

$

35,970

$

91,711

$

145,075

$

283,925

Stock based compensation

-

58,024

132,138

173,516

Consulting fees

242

67,655

3,276

201,619

Marketing expense

30,949

53,877

46,883

305,994

Travel expense

85

3,468

8,299

32,222

Interest expense

14,959

3,972

31,081

16,346

Legal and accounting fees

13,189

29,025

123,564

94,934

Insurance expense

21,752

17,708

58,098

35,691

Regulatory expense

749

6,685

13,577

44,314

Rent

-

1,663

-

4,793

General and administrative expense

12,132

13,787

30,738

53,227

Amortization
expense

20,214

22,070

64,355

66,211

Total Expenses

$

150,241

$

369,645

$

657,084

$

1,312,792

Three Months Ended November 30, 2012 and 2011

Our expenses decreased by approximately $219,000 from $369,645
for the three months ended November 30, 2011 to $150,241 for the three months
ended November 30, 2012.

This decrease was primarily due to decreases of approximately
$208,000 in employee expenses, stock based compensation, consulting fees,
marketing expenses and travel expenses from a total of approximately $274,735
for the three month period ended November 30, 2011 to approximately $67,000 for
the three month period ended November 30, 2012. This decrease represents a
transition from full time sales reps to commission only, reductions in other
marketing programs, and reductions in employees and other consultants. This
decrease to stock based compensation expense is due to the accelerated
amortization of fair value amounts due the stock option cancellations during the
three month period ended May 31, 2012, resulting in no expense for the three
month period ended November 30, 2012.

Additionally, there were decreases of approximately $21,000 in
general and administrative expenses, including rent, legal and accounting fees,
other general and administrative expenses and amortization from a total of
approximately $67,000 for the three month period ended November 30, 2011 to
$46,000 for the three month period ended November 30, 2012. These decreases are
due primarily to general reductions in general and administration activities and
the elimination of rent in the 2012 period.

Regulatory expenses also declined by approximately $6,000 from
a total of approximately $7,000 for the three month period ended November 30,
2011 to $1,000 for the three month period ended November 30, 2012. This decrease
is due primarily to initial set up fees in managing the regulatory aspects of
our company in the 2011 period.

These decreases in expense were offset to some degree by a) an
increase in interest expense of approximately $11,000 from approximately $4,000
in the three month period ended November 30, 2011 to approximately $15,000 for the same period in 2012 as a
result of the amendments to the promissory notes, and b) an increase in
insurance expense of approximately $4,000 due to the addition of a directors and
officers liability insurance policy in September of 2011 and approximately
$22,000 expense in the three month period ended November 30, 2012 to
approximately $18,000 for the same period in 2011.

23

Nine Months Ended November 30, 2012 and 2011

Our expenses decreased by approximately $655,000 from
$1,312,792 for the nine months ended November 30, 2011 to $657,084 for the nine
months ended November 30, 2012.

This decrease was primarily due to decreases of approximately
$665,000 in employee expenses, stock based compensation, consulting fees,
marketing expenses and travel expenses from a total of approximately $1,000,000
for the nine month period ended November 30, 2011 to approximately $335,000 for
the nine month period ended November 30, 2012. This decrease represents a
transition from full time sales reps to commission only, reductions in other
marketing programs, and reductions in employees and other consultants. This
increase to stock based compensation expense is due to the accelerated
amortization of fair value amounts due the stock option cancellations during the
nine month period ended November 30, 2012.

Additionally, there were decreases of approximately $29,000 in
general and administrative expenses, including rent, other general and
administrative expenses and amortization from a total of approximately $124,000
for the nine month period ended November 30, 2011 to approximately $95,000 for
the nine month period ended November 30, 2012. These decreases are due primarily
to general reductions in general and administration activities and the
elimination of rent in the 2012 period.

Regulatory expenses also declined by approximately $30,000 from
a total of approximately $44,000 for the nine month period ended November 30,
2011 to $14,000 for the nine month period ended November 30, 2012. This decrease
is due primarily to initial set up fees in managing the regulatory aspects of
our company in the 2011 period.

These decreases in expense were offset to some degree by a) an
increase in interest expense of approximately $15,000 from approximately $16,000
in the nine month period ended November 30, 2011 to approximately $31,000 for
the same period in 2012 as a result of the amendments to the promissory notes,
b) an increase in insurance expense of approximately $22,000 due to the addition
of a directors and officers liability insurance policy in September of 2011 and
approximately $58,000 expense in the nine month period ended November 30, 2012
to approximately $36,000 for the same period in 2011 and c) an increase in legal
and accounting fees of approximately $30,000 related to the work done in
connection with the Apricus co-promotion and merger negotiations during the nine
months ended November 30, 2012.

Cash Requirements

Our primary objective for the next twelve months is to continue
to commercialize Granisol in the non-exclusive states and to support the
co-promotion efforts of Apricus in the exclusive states.

Specifically, we estimate our operating expenses, excluding
non-cash charges for amortization, for the next 12 months to be as follows:

24

Expense

Amount

Bank charges and interest

$

5,000

Filing fees

10,000

Investor relations

10,000

Legal and accounting fees

100,000

Licenses and permits

10,000

Marketing expense

80,000

Insurance expense

100,000

Personnel and consulting expense

100,000

Regulatory & pharmacovigilance expense

20,000

Transfer agent fees

5,000

Other general & administrative expense

30,000

Total:

$

470,000

These expenses and working capital requirements may be offset
to some degree by revenue generation from sales and co-promotion of Granisol.
There can be no assurance that we will generate revenues significant enough to
offset these expenses to some or any degree and that we will not have
significant needs for other financing to support the activities of our company.
As a result of the termination of merger discussions with Apricus, we have
received 373,134 shares of Apricus common stock in full satisfaction of its
obligation to pay us $1,000,000 in common stock. The value of the stock may be
more or less than $1,000,000 in the aggregate if and when all of the 373,134
shares are sold. There can be no assurance that additional financing will be
available to us when needed or, if available, that it can be obtained on
commercially reasonable terms. If we are not able to obtain the additional
financing on a timely basis, if and when it is needed, we will be forced to
scale down or perhaps even cease the operation of our business.

Future Financing

We will require additional financing to fund our planned
operations. We currently do not have committed sources of additional financing
and may not be able to obtain additional financing, particularly, if the
volatile conditions in the stock and financial markets, and more particularly
the market for early development stage pharmaceutical company stocks persist.

There can be no assurance that additional financing will be
available to us when needed or, if available, that it can be obtained on
commercially reasonable terms. If we are not able to obtain the additional
financing on a timely basis, if and when it is needed, we will be forced to
further delay or further scale down some or all of our activities or perhaps
even cease the operation of our business.

Since inception we have funded our operations primarily through
equity and debt financings and we expect that we will continue to fund our
operations through the equity and debt financing, either alone or through
strategic alliances. If we are able to raise additional financing by issuing
equity securities, our existing stockholders' ownership will be diluted.
Obtaining commercial or other loans, assuming those loans would be available,
will increase our liabilities and future cash commitments.

There is no assurance that we will be able to maintain
operations at a level sufficient for an investor to obtain a return on his, her,
or its investment in our common stock. Further, we may continue to be
unprofitable.

25

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that is material to
stockholders.

Going Concern

Our financial statements and information for the three and nine
month periods ended November 30, 2012, have been prepared by our management on a
going concern basis, which contemplates the realization of assets and the
settlement of liabilities and commitments in the normal course of business. We
have generated limited revenues to date and have generated net income of
$255,087 during the nine month period ended November 30, 2012, and
a net loss of $1,996,239 from inception (March 18, 2005) through
November 30, 2012. We cannot provide any assurance that we will ultimately
achieve profitable operations or become cash flow positive, or raise additional
funds through the sale of debt and/or equity.

26

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.

Not Applicable

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure controls and procedures

We maintain "disclosure controls and procedures", as that term
is defined in Rule 13a-15(e), promulgated by the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as amended.
Disclosure controls and procedures include controls and procedures designed to
ensure that information required to be disclosed in our company's reports filed
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms, and that such information is accumulated and
communicated to our management, including our principal executive officer and
our principal accounting officer to allow timely decisions regarding required
disclosure.

As required by paragraph (b) of Rules 13a-15 under the
Securities Exchange Act of 1934, as amended, our management, with the
participation of our principal executive officer and our principal financial
officer, evaluated our company's disclosure controls and procedures as of the
end of the period covered by this quarterly report on Form 10-Q. Based on this
evaluation, our management concluded that as of the end of the period covered by
this quarterly report on Form 10-Q, our disclosure controls and procedures were
not effective.

The ineffectiveness of our disclosure controls and procedures
was due a material weakness which we identified in our internal control over
financial reporting primarily attributable to limited SEC reporting expertise
within our company. Due to our development stage, we have limited financial
ability to remedy this staffing deficiency at this time.

Changes in internal control over financial
reporting

Except as disclosed below, there were no changes in our
internal control over financial reporting during the fiscal quarter ended
November 30, 2012 that have materially affected, or are reasonably likely to
materially affect our internal control over financial reporting.

Effective March 1, 2012, we gave notice to David Tousley, our
former Chief Financial Officer, Secretary, Treasurer, and director, that we
would be terminating his employment agreement with an effective date of October
31, pursuant to Section 6.3(b) of the agreement. As a result, Mr. Tousleys
employment agreement was terminated with an effective date of October 31, 2012.
Also effective October 31, 2012, Mr. Tousley resigned from all of his offices
with our company. On November 16, 2012, Mr. Tousley resigned from our Board of
Directors.

27

PART IIOTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We know of no material, existing or pending legal proceedings
against our company, nor are we involved as a plaintiff in any material
proceeding or pending litigation. There are no proceedings in which any of our
directors, officers or affiliates, or any registered or beneficial shareholder,
is an adverse party or has a material interest adverse to our interest.

ITEM 1A. RISK FACTORS.

An investment in our common stock involves a number of very
significant risks. You should carefully consider the following risks and
uncertainties in addition to other information in this report in evaluating our
company and its business before purchasing shares of our company's common stock.
Our business, operating results and financial condition could be seriously
harmed due to any of the following risks. You could lose all or part of your
investment due to any of these risks.

Risks Related to Our Company

Our independent auditors have expressed substantial doubt
about our ability to continue as a going concern.

While we have generated revenue from operations since our
incorporation, during the nine month period ended November 30, 2012, we
generated net income of $255,087. From inception through November 30, 2012, we
incurred an aggregate loss of $1,996,239. We anticipate that we will continue to
incur operating expenses which may be offset to some degree by revenues from the
sales and co-promotion of Granisol. Unless we are able to grow the revenues from
Granisol significantly through our own efforts and the co-promotion effort of
Apricus, we may never reach a point where we have positive net income. If we
cannot substantially increase our revenues from sales of Granisol, we will
continue to generate losses and will require additional funding to remain in
business. We estimate our average monthly expenses over the next 12 months to be
approximately $39,000, including general and administrative expenses, but
excluding any development or product acquisition costs. On November 30, 2012, we
had cash and cash equivalents of $31,403. In order to fund our
anticipated budget for the next 12 months, excluding any development or product
acquisition costs, we believe that we will need to raise in excess of $500,000.
This amount could increase if we encounter difficulties that we cannot
anticipate at this time. We have traditionally raised our operating capital from
the sale of equity securities and the placement of notes payable, but there can
be no assurance that we will continue to be able to do so. As a result of the
termination of merger discussions with Apricus, we have received an additional
payment from them of 373,134 shares of Apricus common stock in full satisfaction
of their obligation to pay us $1,000,000. The value of the stock may be more
than or less than $1,000,000 in the aggregate if and when all of the 373,134
shares are sold. This will be dependent on the actual share price of Apricus
stock and does not take into account any stockbroker commissions. If for some
reason we are unable to convert such stock proceeds into cash and could not
otherwise raise the money that we need in order to continue to operate our
business, we will be forced to delay, scale back or eliminate some or all of our
operations. If any of these were to occur, there is a substantial risk that our
business would fail.

These circumstances raise substantial doubt about our ability
to continue as a going concern, as described in the explanatory paragraph to our
independent auditors' report on our financial statements for the year ended
February 29, 2012. Although our financial statements raise substantial doubt
about our ability to continue as a going concern, they do not reflect any
adjustments that might result if we are unable to continue our business. Our financial statements contain
additional note disclosure describing the circumstances that lead to this
disclosure by our independent auditors.

28

Our substantial debt and other financial obligations could
impair our financial condition and our ability to fulfill our debt obligations.
Any refinancing of this substantial debt could be at significantly higher
interest rates.

As of November 30, 2012, we had total debt of
$564,192 (including accrued interest of $64,192). Our substantial
indebtedness and other current financial obligations and any that we may become
a party to in the future could:

impair our ability to obtain financing in the future for working capital,
capital expenditures, partnerships, acquisitions or general corporate
purposes;

have a material adverse effect on us if we fail to comply with financial
and affirmative and restrictive covenants in debt agreements and an event of
default occurs as a result of a failure that is not cured or waived;

require us to dedicate a substantial portion of our cash flow for interest
payments on our indebtedness and other financial obligations, thereby reducing
the availability of our cash flow to fund working capital and capital
expenditures;

limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate; and

place us at a competitive disadvantage compared to our competitors that
have proportionally less debt.

If we are unable to meet our debt service obligations and other
financial obligations, we could be forced to restructure or refinance our
indebtedness and other financial transactions, seek additional equity capital or
sell our assets. We might then be unable to obtain such financing or capital or
sell our assets on satisfactory terms, if at all. Any refinancing of our
indebtedness could be at significantly higher interest rates, and/or incur
significant transaction fees.

We are an early-stage company with a limited operating
history, which may hinder our ability to successfully meet our
objectives.

We are an early-stage company with a limited operating history
upon which to base an evaluation of our current business and future prospects.
Our sales of Granisol have been relatively minimal and, there can be no
assurance that we will be successful in our efforts to increase sales. As a
result, the revenue and income potential of our business is unproven. In
addition, because of our limited operating history, we have limited insight into
trends that may emerge and affect our business. Errors may be made in predicting
and reacting to relevant business trends and we will be subject to the risks,
uncertainties and difficulties frequently encountered by early-stage companies
in evolving markets. We may not be able to successfully address any or all of
these risks and uncertainties. Failure to adequately do so could cause our
business, results of operations and financial condition to suffer.

Our CEO and CFO is engaged elsewhere and his time and effort
will not be devoted to our company full-time.

29

Our CEO and CFO is engaged in other positions with other
companies. As a result, our company is and will continue to be managed on a
part-time basis. Our business could be adversely impacted by the lack of full
time management.

If we are unable to successfully recruit qualified
managerial and field personnel, we may not be able to continue our
operations.

In order to successfully implement and manage our business
plan, we will depend upon, among other things, successfully recruiting qualified
managerial and field personnel having experience in the pharmaceutical industry.
Competition for qualified individuals is intense. We may not be able to find,
attract and retain qualified personnel on acceptable terms. If we are unable to
find, attract and retain qualified personnel with technical expertise, our
business operations could suffer.

Risks Relating to the Pharmaceutical Business

Our pharmaceutical expenditures may not result in
commercially successful products.

We cannot be sure our business expenditures will result in the
successful partnering, acquisition, development or launch of products that will
prove to be commercially successful or will improve the long-term profitability
of our business. If such business expenditures do not result in successful
partnering, acquisition, development or launch of commercially successful brand
products our results of operations and financial condition could be materially
adversely affected.

Third-parties may claim that we infringe their proprietary
rights and may prevent us from manufacturing and selling some of our
products.

The manufacture, use and sale of new products that are the
subject of conflicting patent rights have been the subject of substantial
litigation in the pharmaceutical industry. These lawsuits relate to the validity
and infringement of patents or proprietary rights of third parties. Litigation
may be costly and time-consuming, and could divert the attention of our
management and technical personnel. In addition, if we infringe on the rights of
others, we could lose our right to develop, manufacture or market products or
could be required to pay monetary damages or royalties to license proprietary
rights from third parties. Although the parties to patent and intellectual
property disputes in the pharmaceutical industry have often settled their
disputes through licensing or similar arrangements, the costs associated with
these arrangements may be substantial and could include on-going royalties.
Furthermore, we cannot be certain that the necessary licenses would be available
to us on commercially reasonable terms, or at all. As a result, an adverse
determination in a judicial or administrative proceeding or failure to obtain
necessary licenses could prevent us from manufacturing and selling a number of
our products, and could have a material adverse effect on our business, results
of operations, financial condition and cash flows.

The loss of or inability to attract key personnel could
cause our business to suffer.

The success of our present and future operations will depend,
to a significant extent, upon the experience, abilities and continued services
of key personnel. We cannot assure you that we will be able to attract and
retain key personnel. Employment or consulting agreements with our senior
executives do not guarantee that our senior executive officers will continue to
work for us for a significant period of time, or at all. We do not carry
key-employee life insurance on any of our officers.

We may need to raise additional funds in the future which
may not be available on acceptable terms or at all.

30

We may consider issuing additional debt or equity securities in
the future to fund potential acquisitions or investments, to refinance existing
debt, or for general corporate purposes. If we issue equity or convertible debt
securities to raise additional funds, our existing stockholders may experience
dilution, and the new equity or debt securities may have rights, preferences and
privileges senior to those of our existing stockholders. If we incur additional
debt, it may increase our leverage relative to our earnings or to our equity
capitalization, requiring us to pay additional interest expenses. We may not be
able to market such issuances on favorable terms, or at all, in which case, we
may not be able to develop or enhance our products, execute our business plan,
take advantage of future opportunities, or respond to competitive pressures or
unanticipated customer requirements.

All pharmaceutical companies are subject to extensive, complex,
costly and evolving government regulation. For the U.S., this is principally
administered by the FDA and to a lesser extent by the DEA and state government
agencies, as well as by varying regulatory agencies in foreign countries where
products or product candidates are being manufactured and/or marketed. The
Federal Food, Drug and Cosmetic Act, the Controlled Substances Act and other
federal statutes and regulations, and similar foreign statutes and regulations,
govern or influence the testing, manufacturing, packing, labeling, storing,
record keeping, safety, approval, advertising, promotion, sale and distribution
of our products.

Under these regulations, we may become subject to periodic
inspection of our facilities, procedures and operations and/or the testing of
our products by the FDA, the DEA and other authorities, which conduct periodic
inspections to confirm that we are in compliance with all applicable
regulations. In addition, the FDA and foreign regulatory agencies conduct
pre-approval and post-approval reviews and plant inspections to determine
whether our systems and processes are in compliance with cGMP and other
regulations. Following such inspections, the FDA or other agency may issue
observations, notices, citations and/or Warning Letters that could cause us to
modify certain activities identified during the inspection. FDA guidelines
specify that a Warning Letter is issued only for violations of "regulatory
significance" for which the failure to adequately and promptly achieve
correction may be expected to result in an enforcement action. We are required
to report adverse events associated with our products to FDA and other
regulatory authorities. Unexpected or serious health or safety concerns would
result in labeling changes, recalls, market withdrawals or other regulatory
actions.

The range of possible sanctions includes, among others, FDA
issuance of adverse publicity, product recalls or seizures, fines, total or
partial suspension of production and/or distribution, suspension of the FDA's
review of product applications, enforcement actions, injunctions, and civil or
criminal prosecution. Any such sanctions, if imposed, could have a material
adverse effect on our business, operating results, financial condition and cash
flows. Under certain circumstances, the FDA also has the authority to revoke
previously granted drug approvals. Similar sanctions as detailed above may be
available to the FDA under a consent decree, depending upon the actual terms of
such decree. If internal compliance programs do not meet regulatory agency
standards or if compliance is deemed deficient in any significant way, it could
materially harm our business.

The pharmaceutical industry is highly competitive.

The pharmaceutical industry has an intensely competitive
environment that will require an on-going, extensive search for technological
innovations and the ability to market products effectively, including the
ability to communicate the effectiveness, safety and value of products to
healthcare professionals in private practice, group practices and managed care
organizations ("MCOs"). We are smaller than most of our competitors. Most of our
competitors have been in business for a longer period of time than us, have a
greater number of products on the market and have greater financial and other
resources than we do.

31

Furthermore, recent trends in this industry are toward further
market consolidation of large drug companies into a smaller number of very large
entities, further concentrating financial, technical and market strength and
increasing competitive pressure in the industry. If we directly compete with
them for the same markets and/or products, their financial strength could
prevent us from capturing a profitable share of those markets. It is possible
that developments by our competitors will make any products or technologies that
we acquire non- competitive or obsolete.

Risks Relating to Our Common Stock

If we issue additional shares in the future, it will result
in the dilution of our existing shareholders.

Our articles of incorporation authorize the issuance of up to
150,000,000 shares of common stock with a par value of $0.0001 per share. Our
Board of Directors may choose to issue some or all of such shares to acquire one
or more products and to fund our overhead and general operating requirements.
The issuance of any such shares will reduce the book value per share and may
contribute to a reduction in the market price of the outstanding shares of our
common stock. If we issue any such additional shares, such issuance will reduce
the proportionate ownership and voting power of all current shareholders.
Further, such issuance may result in a change of control of our corporation.

Trading of our stock is restricted by the Securities
Exchange Commission's penny stock regulations, which may limit a stockholder's
ability to buy and sell our common stock.

The Securities and Exchange Commission has adopted regulations
which generally define "penny stock" to be any equity security that has a market
price (as defined) less than $5.00 per share or an exercise price of less than
$5.00 per share, subject to certain exceptions. Our securities are covered by
the penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
"accredited investors". The term "accredited investor" refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the Securities and
Exchange Commission, which provides information about penny stocks and the
nature and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.

FINRA sales practice requirements may also limit a
stockholder's ability to buy and sell our stock.

In addition to the "penny stock" rules described above, the
Financial Industry Regulatory Authority (known as "FINRA") has adopted rules
that require that in recommending an investment to a customer, a broker-dealer
must have reasonable grounds for believing that the investment is suitable for
that customer. Prior to recommending speculative low priced securities to their
non-institutional customers, broker-dealers must make reasonable efforts to obtain
information about the customer's financial status, tax status, investment
objectives and other information. Under interpretations of these rules, FINRA
believes that there is a high probability that speculative low priced securities
will not be suitable for at least some customers. FINRA requirements make it
more difficult for broker-dealers to recommend that their customers buy our
common stock, which may limit your ability to buy and sell our stock and have an
adverse effect on the market for our shares.

32

Our common stock is illiquid and the price of our common
stock may be negatively impacted by factors which are unrelated to our
operations.

Although our common stock is currently listed for quotation on
the OTC Bulletin Board, trading through the OTC Bulletin Board is frequently
thin and highly volatile. There is no assurance that a sufficient market will
develop in our stock, in which case it could be difficult for shareholders to
sell their stock. The market price of our common stock could fluctuate
substantially due to a variety of factors, including market perception of our
ability to achieve our planned growth, quarterly operating results of our
competitors, trading volume in our common stock, changes in general conditions
in the economy and the financial markets or other developments affecting our
competitors or us. In addition, the stock market is subject to extreme price and
volume fluctuations. This volatility has had a significant effect on the market
price of securities issued by many companies for reasons unrelated to their
operating performance and could have the same effect on our common stock.

We do not intend to pay dividends on any investment in the
shares of stock of our company.

We have never paid any cash dividends and currently do not
intend to pay any dividends for the foreseeable future. Because we do not intend
to declare dividends, any gain on an investment in our company will need to come
through an increase in the stock's price. This may never happen and investors
may lose all of their investment in our company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

The promissory notes in the aggregate principal balances of
$500,000 bearing simple interest at 12% annum were not paid on their due dates
of December 31, 2012 and are due on demand.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

On Thursday, January 3, 2013, Apricus Biosciences, Inc.
announced their intentions to sell off their oncology supportive care business,
which includes Granisol. We are currently evaluating the impact of this decision
by Apricus on our future operations.

33

ITEM 6. EXHIBITS.

Exhibits required by Item 601 of Regulation S-K:

No.

Description

3.1

Articles of Incorporation (attached as an
exhibit to our registration statement on Form 10-SB filed on September 8,
2006)

3.2

Certificate of Change (attached as an exhibit
to our current report on Form 8-K filed on September 15, 2008)

3.3

Articles of Merger (attached as an exhibit to
our current report on Form 8-K filed on December 28, 2010)

3.4

Amended and Restated Bylaws (attached as an
exhibit to our registration statement on Form 8-K filed on November 3,
2010)

10.1

Form of Private Placement Subscription
Agreement (attached as an exhibit to our current report on Form 8-K filed
on November 6, 2008)

10.2

Form of Private Placement Subscription
Agreement dated June 15, 2009 (attached as an exhibit to our quarterly
report on Form 10-Q filed on June 16, 2009)

10.3

Form of promissory note dated June 15, 2009
(attached as an exhibit to our quarterly report on Form 10-Q filed on June
16, 2009)

10.4

Consulting Agreement with Cameron Durrant dated
May 28, 2010 (attached as an exhibit to our quarterly report on Form 10-Q
filed on June 28, 2010)

10.5

Letter of Intent with Cypress Pharmaceuticals
Inc. (attached as an exhibit to our quarterly report on Form 10-Q filed on
June 28, 2010)

10.6

Form of Private Placement Subscription
Agreement (attached as an exhibit to our current report on Form 8-K filed
on June 17, 2010)

10.7

Form of Private Placement Subscription
Agreement (attached as an exhibit to our current report on Form 8-K filed
on July 9, 2010)

10.8

Asset Purchase Agreement dated July 22, 2010
with Cypress Pharmaceuticals, Inc. (attached as an exhibit to our current
report on Form 8-K filed on July 28, 2010) (portions of the exhibithave been omitted pursuant to a request for confidential treatment)

10.9

Assignment and Assumption of Contract dated
July 22, 2010 with Cypress Pharmaceuticals, Inc. (attached as an exhibit
to our current report on Form 8-K filed on July 28, 2010)

10.10

Consent to Assignment by Therapex and E-Z-EM
Canada Inc. (attached as an exhibit to our current report on Form 8-K
filed on July 28, 2010)

10.11

Manufacturing and Supply Agreement dated July
22 2010 between Cypress Pharmaceuticals, Inc. and Therapex, a division of
E-Z-EM Canada Inc. (attached as an exhibit to our current report on Form
8-K filed on July 28, 2010) (portions of the exhibit have been
omittedpursuant to a request for confidential treatment)

10.12

Form of Private Placement Subscription
Agreement (attached as an exhibit to our current report on Form 8-K filed
on July 29, 2010)

10.13

Form of Promissory Note dated July 26, 2010
(attached as an exhibit to our current report on Form 8-K filed on July
29, 2010)

10.14

Employment Agreement effective July 1, 2010
with David L. Tousley (attached as an exhibit to our current report on
Form 8-K filed on September 16, 2010)

10.15

Employment Agreement effective July 1, 2010
with Jorge Rodriguez (attached as an exhibit to our current report on Form
8-K filed on September 16, 2010)

10.16

Consulting Agreement effective July 1, 2010
with Cameron Durrant (attached as an exhibit to our current report on Form
8-K filed on September 28, 2010)

10.17

Form of Private Placement Subscription
Agreement (attached as an exhibit to our current report on Form 8-K filed
on September 28, 2010)

10.18

Form of Promissory Note dated September 16,
2010 (attached as an exhibit to our current report on Form 8-K filed on
September 28, 2010)

10.19

Termination Agreement effective July 1, 2010
with Cameron Durrant (attached as an exhibit to our current report on Form
8-K filed on September 28, 2010)

10.20

Management Stock Agreement made effective July
1, 2010 with Cameron Durrant (attached as an exhibit to our current report
on Form 8-K filed on November 3, 2010)

34

No.

Description

10.21

Management Stock Agreement made effective July
1, 2010 with David Tousley (attached as an exhibit to our current report
on Form 8-K filed on November 3, 2010)

10.22

Form of Private Placement Subscription
Agreement (attached as an exhibit to our current report on Form 8-K filed
on November 3, 2010)

10.23

Form of Private Placement Subscription
Agreement (attached as an exhibit to our current report on Form 8-K filed
on December 2, 2010)

10.24

Form of Shares for Debt Subscription Agreement
(attached as an exhibit to our current report on Form 8-K filed on
December 2, 2010)

10.25

Cancellation Agreement dated February 9, 2011
with Cameron Durrant (attached as an exhibit to our current report on Form
8-K filed on February 10, 2011)

10.26

Cancellation Agreement dated February 9, 2011
with David Tousley (attached as an exhibit to our current report on Form
8-K filed on February 10, 2011)

10.27

Lock-up Agreement dated February 9, 2011 with
Cameron Durrant (attached as an exhibit to our current report on Form 8-K
filed on February 10, 2011)

10.28

Lock-up Agreement dated February 9, 2011 with
David Tousley (attached as an exhibit to our current report on Form 8-K
filed on February 10, 2011)

10.29

2011 Stock Option Plan (attached as an exhibit
to our current report on Form 8-K filed on February 22, 2011)

10.30

Form of Stock Option Agreement (attached as an
exhibit to our current report on Form 8-K filed on March 7, 2011)

10.31

Form of Private Placement Subscription
Agreement including Form of Promissory Note dated May 6, 2011 (attached as
an exhibit to our current report on Form 8-K filed on May 11, 2011)

10.32

Form of Promissory Note Amendment dated May 18,
2011 (attached as an exhibit to our current report on Form 8-K filed on
May 18, 2011)

10.33

Form of Promissory Note Amendment dated May 23,
2011 (attached as an exhibit to our current report on Form 8-K filed on
May 23, 2011)

10.34

Form of Stock Option Agreement (attached as an
exhibit to our current report on Form 8-K filed on July 26, 2011)

10.35

Co-Promotion Agreement dated September 12, 2011
with Bi-Coastal Pharmaceutical Corp., (attached as an exhibit to our
current report on Form 8-K filed on September 14, 2011) (portions of
the exhibit have been omitted pursuant to a request for confidential
treatment)

10.36

Form of Stock Option Agreement (attached as an
exhibit to our current report on Form 8-K filed on September 15, 2011

10.37

Independent Contractor Agreement effective July
1, 2011 with Cameron Durrant (attached as an exhibit to our current report
on Form 8-K filed on September 30, 2011)

10.38

Amendment to Stock Option Agreement, Waiver and
Release dated December 15, 2011 with Jorge Rodriguez (attached as an
exhibit to our quarterly report on Form 10-Q filed on January 17, 2012)

10.39

Binding term sheet for (1) Granisol and Aquoral
US Co-promotion Agreement, (2) Sale of ex- US rights for Granisol and
non-binding term sheet for merger of PediatRx Inc. and Apricus
Biosciences, Inc. dated January 26, 2012 (attached as an exhibit to our
current report on Form 8-K filed on January 27, 2012)

10.40

Asset Purchase Agreement dated February 21,
2012 with Apricus Biosciences, Inc. (attached as an exhibit to our annual
report on Form 10-K filed on May 18, 2012)

10.41

Co-Promotion Agreement dated February 21, 2012
with Apricus Biosciences, Inc. (attached as an exhibit to our annual
report on Form 10-K filed on May 18, 2012) (portions of theexhibit have been omitted pursuant to a request for confidential
treatment)

10.42

Form of $50,000 Promissory Note Amendment dated
April 19, 2012 (attached as an exhibit to our annual report on Form 10-K
filed on May 18, 2012)

10.43

Form of $250,000 Promissory Note Amendment
dated April 19, 2012 (attached as an exhibit to our annual report on Form
10-K filed on May 18, 2012)

35

No.

Description

10.44

Termination Agreement dated June 27, 2012 with
Apricus Biosciences, Inc. (attached as an exhibit to our current report on
Form 8-K filed on June 28, 2012)

10.45

Form of $200,000 Promissory Note Amendment
dated July 25, 2012 (attached as an exhibit to our current report on Form
8-K filed on July 27, 2012)

10.46

Form of $50,000 Promissory Note Amendment dated
July 25, 2012 (attached as an exhibit to our current report on Form 8-K
filed on July 31, 2012)

10.47

Form of $250,000 Promissory Note Amendment
dated July 25, 2012 (attached as an exhibit to our current report on Form
8-K filed on July 31, 2012)